Hi, everyone, and thank you for joining us today. Welcome to Strauss Group Fourth Quarter and Annual 2021 Results Virtual Conference. Today, in addition to our annual results, we publish our five-year Group's strategy as well as our annual Sustainability Report. Both are posted on our website. Today, we will present only the highlights of our new strategy and purpose due to time constraints. However, we will be conducting one-on-ones over the next couple of weeks, where we will be able to go into a greater detail of our strategy. Please feel free to contact me if you'd like to schedule a one-on-one meeting. Following management's formal presentation, we will conduct a Q&A session. Please feel free to post any questions you may have in the chat box, or email me, or send me a WhatsApp.
As a reminder, this online Zoom conference is being recorded Tuesday, March 22nd, 2022. I would like to remind everyone that this online webinar may contain projections or other forward-looking statements regarding future events or the future performance of the company. These statements are only predictions and may change, as time passes. Strauss does not assume any obligation to update that information. Actual events or results may differ materially from those projected, including as a result of changing industry and market trends, reduced demand for our products, the timing development of new products and their adoption by the market, increased competition in the industry, and price reductions, as well as risks identified in the documents filed by the company with the Israel Securities Authority.
Online today are Mr. Giora Bardea, CEO of Strauss Group, and Mr. Ariel Chetrit, CFO, and myself, Daniella Finn, Head of Investor Relations. We shall start with a recap of the quarterly results by CFO Ariel Chetrit, and then move on to the highlights of the strategy to be presented by CEO Giora Bardea. Ariel, please go ahead.
Thank you very much, Daniella. Hi, everybody. Good morning, good afternoon.
We can't hear Ariel. One minute.
Do you hear me now?
Um.
Yes?
We can hear you, Ariel.
No, we can't.
Okay. Giora hears me. I think Giora hears me, so I think.
Yeah, I can hear you. I hear you.
Okay. I will continue. Daniella, can you hear me now?
Yes, we can. Sorry about that.
Okay. Sorry, everybody, for that. Good afternoon, good morning, to you all. We're happy to be with you again. Hopefully in the coming months we can meet some of you face-to-face and be together after a very long time that we haven't met each other face to face. This is a very special day for us in Strauss Group because we're not only publishing our financial annual report but also we have published today our Sustainability Report. Most importantly, we've published our purpose and strategy for the next few years. As Daniella said, we won't have a lot of time to elaborate on this, but Giora will give the highlights.
Therefore, I will shorten my presentation on the Q4 results. Of course, we will open everything for a Q&A afterwards. If we look at the top line that says fourth quarter, Strauss Group grew 9.3% in Israeli shekels, a very nice growth in the top line. Organically excluding FX effects, we grew 12.6%. We can see that the growth stems from all of our reporting segments. The coffee segment grew dramatically, more than 20% organically due to price increases, list price increases in Brazil, in Central and Eastern Europe, and also growth in volume almost everywhere.
We had a very good boost to our sales in the coffee segment in the fourth quarter. Strauss Israel grew 8.5%. It is very high growth rate. Some of it is due to the timing of the Israel New Year holidays. Also in our annual growth in Strauss Israel segment, you can see that we grew 4.2%. If you look at our Strauss Israel segment in the past five or six years, you can see that on average we grew there at around 5% annually. We are having a very, very nice momentum of long-term growth in Strauss Israel. This quarter is another quarter of excellent growth.
In the dips and spreads segment, we grew organically in local currencies 3%. Our growth stopped in Sabra at the second half of December due to the shutdown of our factory there to prepare the factory to our recovery plan that we commenced at the beginning of January, and we are commencing it up until now we're on schedule on time. When we're heading towards the end of March, our capacity and our production there it has improved dramatically. Today we are producing around 70%-80% of our total regular production.
Hopefully in the second quarter, we will reach 100% production capabilities and at the second half of the year, we'll go back and put all of our products that we're missing from the point of sales shelves in the past few months. Hopefully, at the end of 2022, we'll come back to the situation where Sabra performs on a full basis, both in sales and in production. Going back to the fourth quarter, Sabra grew nicely up until the factory shutdown, and due to the factory shutdown, the growth slowed, and therefore only the 3% organic growth. In Strauss Water we grew 3.8% organically, 3.7 in Israeli shekels.
A nice growth for the fourth quarter, and a double-digit growth for the whole year of 2021 in Strauss Water, continuing the good momentum in sales. When we look at the gross profit, we can see the effect of the raw materials inflation and other inputs inflation across our segments, not only the green coffee, but also other raw materials and packaging materials. We can see that we grew in our gross profit from ILS 783 million to ILS 795 million quarter- on -quarter. Our gross profitability decreased to 35.1% on the group level. You can see that we have decreased in our gross profitabilities all over our segments, mostly in the coffee segments, but all over our segments.
Still, we managed to reverse most of the effect of the input inflation in the fourth quarter. With our OpEx expenses and due to our very nice and high growth in the top line, which helped us leverage our fixed costs, and therefore you can see a very nice growth in the EBIT in Strauss Israel and Strauss Coffee this quarter. Strauss Israel, we're used to it, of course, positively used to this growth for the past many quarters now. In Strauss Coffee, this is very good news because we saw growth in our EBIT results both in Brazil and in Central and Eastern Europe due to the growth in their sales and the adjustments of selling prices.
Also a ILS 1 million growth in Strauss Water profit. The ILS 15 million decrease in profit marked as other is mainly due to our FoodTech Hub results. Last quarter, meaning Q4 2020, we had a few raise rounds which gave us a nice profit. In this quarter, we had only equity losses as our part of the losses of the portfolio companies in our FoodTech portfolio. That if we look at the whole year, you can see that we registered this year a record number of ILS 73 million profit from our FoodTech activity. We see this FoodTech activity becoming more and more strategic to the group.
We fully believe that it will continue to grow both in fair value and in its contribution, future contributions to our P&L. We can also have a little focus on Brazil, because Brazil is starting to recuperate from the year and a half to two years decrease in their results. In the middle of the year, we can see the turning point. The third quarter was a slight improvement. You can see that the fourth quarter brings a very substantial improvement in the results. You can see the 33% growth in the top line due to prices adjustment, but without losing volume which is very important, meaning that our price increases did not affect the demand for our coffee products in Brazil.
We can see a very nice absolute growth in a local currency in the gross profit. Still declining in the gross margin, but it will take time, but eventually we'll come back to our original gross margins in Brazil. We can see that the gross profit in monetary terms is the highest gross profit in the fourth quarter that we ever seen in Brazil. The EBIT line also in absolute terms, BRL 96 million is also the highest profit in the fourth quarter ever in Brazil. We can see this momentum continuing into the first quarter of 2022.
If we assume that coffee prices will remain stable as they have been in the past couple of months, for the remainder of 2022, we can expect to see a very nice improvement in our Três Corações results in the whole year of 2022. If we look at the net income in the fourth quarter, we can see a nice profit of ILS 103 million, 4.6% net margin, an improvement compared to the fourth quarter of 2020.
We can see that an important part of this improvement came from our financial expenses, which were reduced due to our debt optimization program that we executed in 2020, which reduced our effective interest rate from 3.5%- 2.5%. We can see the results both in the quarter and in the whole year. If we look at our net debt, our gearing ratio net debt to EBITDA, we're at 4.3 with less than ILS 1.7 billion of net debt.
This is one of the lowest, if not the lowest, gearing ratio that we've been in for many years now in Strauss, and it is from a financial flexibility and opportunity perspective, it's a great starting point for our strategy for the next five years, which includes increased investments both in CapEx and OpEx and M&As. Therefore, we believe we are starting this journey from a very, very solid and flexible financial point. Just to say one word on the net income of the whole year. We have a record-high net income for annual results ever in Strauss Group, ILS 639 million with 7.3% net margin.
We can see the very big contribution on an annual basis of the FoodTech activities with very nice fair value increases during this year. The fair value of our FoodTech portfolio increased from ILS 111 million at the beginning of the year to ILS 375 million at the end of the year. We believe that this fair value will continue to grow substantially in the coming years. Again, the nice improvement in our finance expenses as I explained before. With this, I will conclude the Q4 results presentation, and we can move forward to Giora's highlights on strategy.
Thank you, Ariel. Giora, please go ahead.
What do you see on the screen?
We see Taste the Future.
Taste the Future, this is the name. Good afternoon, good morning, everyone. Really, we are very excited to complete the full strategy after around 18 months, some with the corona, with all the difficulties to build and to develop the global strategy for Strauss. Nowadays, we are ready and very excited and proud to share with you. Thank you, Ariel, and let's move on. Okay. We are very proud, since from the very beginning of our company, to be a purpose-led company, to be relevant and to lead in the future, but always keep to stay us. To stay who we are, that we see as a kind of lighthouse that direct us from the very beginning of the founders till these days.
Understanding that something happened around us, from all the parameters, the new trends, technology, people, consumer, food, we understood that we need to redesign our purpose. The new one is nourishing a better tomorrow. This is a promise that we make to our stakeholders, all of them, and to all people around us, communities and the environment. As a food business, nourishing is the key, but we understand that we need to do it in a different way because it's a different ecosystem that now runs all over. When we say nourishing a better tomorrow, this is our commitment to all our stakeholders. For sure, we start with the consumer. We want to help everyone to live a happy and a full life by offering safe and sustainable food. This will address their needs, and their specific needs, and provide them with choices.
We talk about the shareholders. Nourishing a better tomorrow means that we will for sure, we will promoting excellence in everything that we need to do in order for you, the investors, all, and the rest of the shareholder to be proud with our company, to be proud with our excellence, and to continue to invest in our journey. Third one is our business partners. I'm sure you know that one of the uniqueness of Strauss is running the business together with global and local partners. We'll continue to nourish our relationship with respect, honesty, and collaboration. We'll make sure that they continue to feel that they are part of us, part of Strauss business and family. Next one is our employees. We will nurture and foster the special potential.
We understand that there's a lot of changes around the labor and the talent around us, and we emphasize how to nourish them, how to take them together with us for the journey and build inclusive company, be enough attractive for the new talents, for the new capabilities, and they will join us for long time. For sure, the last but not least is the next generation. We promise to leave a positive impact. Not just to develop and produce good product. We should be sure that we don't leave any harm, and we leave a positive impact on the planet. Taking all of those lead us to our new strategy.
I'm sure you know, maybe, but not the complete, so I would like just a couple of slides just to share with you why we feel so confident, and we feel that we are on the right spot, on the right starting point for the next five years. You can see here that we are very resilient. Our revenue ILS 8.7 billion, and very strong home base in Israel, very good, very strong credit rating, and in all the parameters with the partners, we feel that the company nowadays is ready for the next leap. Looking back to the last six years, you can see here what happened with our net margin, with our fair value of The Kitchen, our FoodTech Hub. Look at the Ariel already mentioned, the gearing, the low level of the debt.
We took some very tough decisions about our portfolio. It's not just M&A, it's M&A and D [uncertain], and now we are much more focused and have the right portfolio. You can see here what happened with the dividend. Very constant year after year, we pay dividend to our shareholders. The growth, if we look just like for like, it means the local currencies, the growth is amazing year-over-year. The TSR and et cetera. When we look at the future for the next five years, we can see four pillars for our strategy. One is to renew the core. Second is to expand, push the boundaries, and I'll explain in a minute. Third one is to build new businesses.
We understand very clear that in order to accomplish all of those, we should transform the way we operate, the way we manage the business, the procedures, the people, the culture, et cetera. All of those, the four pillars, build together the story of the next five years. Now let's talk a bit about each one of them. When we say renew and expand the core, we understand very well that our core is amazing, but still has a lot of potential to grow. It's not just because we are so strong in Israel or in some other countries, this is not the end game. We believe that we need to find a better solution for flexitarians. Our portfolio today is not good enough and is not accurate enough for the new generation of flexitarians. Snacking for the millennials.
Strauss Israel, in the United States, we are very strong. We are strong leader in snacking. The meaning of snacking and the nutrition of snacking and the way people buy and eat snacking are different. We need to make a development and to develop better snacking that fit to the new generation, for the millennials and others. The water, we have a very interesting potential in our water business, but still we have very narrow variety of product, and now we are working to enlarge, to expand the product, the variety of the technology, not just one machine fits all. We develop now a variety which will take us out of Israel much faster. Next one is accelerate the specialty brands. We have in Strauss all over the world, blockbuster, very strong leading brands.
More and more we understand that the consumer is. They have a different expectation, and they would like to buy, to eat, to use very specific brands, not just the big ones, but sometimes they want specific one for gluten-free, for lactose-free, for veggie, for vegan. We need to develop and support not just the big and the blockbusters, but to invest or to develop or to buy small, medium brands that will aim at a different target, a different audience. Food as a service is a very interesting one. More and more, we understand that the way people buy, the way people reach our product is different from, let's say, five, 10 years back.
We would like to build, and now we start the process to develop internal platform to go after consumers in their office, home, not just the regular and the historical way to market of the retailers. We develop a food as a business. Last but not least is the culinary solution. Till now, Strauss is out of the main plate. We are snacking, we are out of home, we are not in the main plate. We believe we understand that we have a lot of capabilities to build a better culinary solution and to move slowly more to the plate as a side dish, as an in-between meal, et cetera. The second, as I call it before, expand. We believe that we have amazing three pillars out of Israel.
It's the Sabra, the United States, it's the Brazil with the Lima Brothers, the Coffee, and the Water in China. After learning and talking with our partners, we understand and we are ready to push the boundaries of this partnership and to do more than the core of the business. For example, in Sabra, we are talking with our partner, Pepsi United States, to go more than just hummus. We have amazing brand, we have technology, we have the right people, we have the right partner on the ground there in Pepsi. So we understand from a couple of surveys that we can take it much further than just hummus. Nowadays we are planning, and we are searching about specific categories, product, activities in order to push the boundaries with Sabra.
Second one in Brazil that we already started a couple of years ago, but lately we are much more accelerated the process, is how to leverage on our strength in coffee. We are strong number one with thousands of points of sale, amazing partner, amazing sales force, and we check now which categories we can add and leverage on the existing platform. For example, we bought last year, a year and a half ago, we bought plant-based milk that goes and fit to the coffee. Nowadays we are already almost number one in Brazil, and we believe that together with the partner, we can find some more activities, adjacent categories in Brazil, not just to stay as a coffee company. Haier. We already start to talk with Haier about wider variety of our activities, not just point of use water.
Maybe we can do some more in wider activities. Now we have factory, we have R&D center in China. We build and invest together. Now time to see if and how we can enlarge the business. When you talk about the build, it's a totally different. Here we talk literally on new businesses. New businesses that today we don't have yet. One, we talk about United States. We believe that United States as a leading consumer goods company with a very strong economy and currency, and we understand, we are very familiar with the business culture. We wish to build or to buy, it looks like more M&A, another platform. Now I talk out of Sabra.
It's in addition to Sabra to bring in some product either from our FoodTech or different innovation in order to get and to help and to lead a platform in United States that will take, down the road, plus ILS 1 billion more than just the sum of today. Second is the future, we call it future food. This is mainly based on the FoodTech, on The Kitchen. We gain the bid from the Israeli government, and nowadays we are developing the next step of the FoodTech. Here we have double benefit. One benefit is, down the road, we have equity profit, equity value. In some of them we can leverage in other countries.
If, at the end of the day, we have some product that we can distribute in Israel, United States, Brazil, we would be able to see it as a part of the top line. If not, we gain a lot of equity from these activities. Down the road, it means for us, as you can see now, Ariel mentioned before, the profit from these activities. Last but not least, is the water. As I said, after the great success in China, in Israel, and lately in UK, now time to develop a couple of variety of technology and machinery and to go out of Israel to a new country.
Now we check which countries fit to our portfolio, with or without partners, and I believe sooner than later, we will move to the next step of the water. But as I said before, to be very humble and modest, we understand that we should change our or improve our way to do business. We talk about improving or changing the culture. You know, the culture of Strauss is one of our competitive edge, but we understand that we need to improve and to change a bit here and there. It's about different talents, different people. We need to be much more faster, more agile. To take care about the culture that will.
What we call internally future-fit culture, not just to enjoy and to leverage on the past, but to find what we need to change internally with our people, with our manager, with our procedure, in order to be better a future-fit company. When you talk about capabilities, is similar for it's a new kind of M&A, it's a new kind of business model. We need to change and to develop or to hire new people with new capabilities that will fit us. For example, we invest almost triple our investment CapEx in IT, in digital transformation for the next five-year. It means that we understand that the R&D, the IT and the digital is more as a competitive edge, not just kind of enabler to run the business. It means new people, new processes, new structure in order to achieve it.
The third one is resource optimization. It means that we should allocate our resources much better. On one hand, much more aggressive productivity project, much better cash management, much better working capital in order to gain some cash to invest in our portfolio, in our ambitions in the future. We talk here about new business model. We are now in a process to change our business model internally. Means that the operation should be different. Much more flattened organization, saving a lot of money there in order to invest and to run the business much more faster than we do today. Sustainability at the core, we believe, and we are sure that sustainability is key. No more, just a kind of you know, nice to have. It's part of the business.
Not by coincidence today, when we report about our annual and the last quarter results, together today, we distribute our Sustainability Report about 2021. We choose from the 17 objectives of the United Nations the five objectives that we believe we can leave impact. As a food and beverage company, we can leave impact on those. It means better nutrition and health, sustainable supply chain, impact on the climate that we can improve from our side, much better water management, use less water, and people and community means about more diversity in our business, women in management role and et cetera, et cetera.
These five would be part of our objectives, part of our measurement quarter- by- quarter in order to see and to follow up that we are improving ourselves step by step. Okay, to recap and to conclude, we talk about 5% annual revenue. We talk about better profit margin, to expand the profit margin. We talk about CapEx, either CapEx for growth or for productivity more than 4%. This is a very high number for us. The home base is still having a huge potential to grow and to change the structure, as I said before. The FoodTech and to gain fair value from our FoodTech. The global expansion, as I said, M&A and strategy in Brazil and United States. To expand the water business.
We believe we can double the water business during the next five years. ESG focus, digital revolution as part of our readiness for the future and to build brand with purpose that people will be loyal and continue to trust the company and buy our product. This is the main objectives. Behind them, there is a lot of initiatives and objectives, but these are the top ones that will lead us and take us for the future. Thank you, and we are ready for any question now.
Thank you very much, Giora. I'd like to remind all listeners, you are most welcome to post any questions you may have on the chat or the Q&A boxes below. In the meantime, we have three questions from Chris Reimer at Barclays. Thank you, Chris. The first one is looking at the impact of raw material costs, how do you gauge the company's ability to pass on this increase to customers?
Okay. I'll address this question. First of all, for internal regulatory procedures, we cannot talk about our future intentions on pricing, but we can of course relate to what we've done up until now and learn from it. What we've seen up until now, I'm talking about mid-March 2022, we have raised prices and in Brazil, in Central Eastern Europe, in the U.S., and we can see that raising prices in these areas is helping us close the gap between the input inflation and a gross profitability decrease and our sales.
We can see that, as I mentioned before, in Brazil, we are very close to closing this gap, and we will probably close it at the very near future, and we will see ourselves with much higher absolute profit and going back gradually to previous profitability. In other places, it will take also time, but we believe that eventually we'll be there. Not in all places we made the pricing, but as you can see, for example, in Israel, where we haven't made pricing for the past 12 years, we know how to grow and to leverage this growth to the bottom line. Okay?
We are declining in our gross profitability, but we are managing to leverage our fixed costs, and due to productivities and a very high sales growth, we manage to keep and maintain our bottom line profits. As Giora mentioned in the strategy, we believe that we have all the capabilities and the opportunities to continue to grow 5% annually in the next five years. This for itself will help us a lot to bridge the input inflation.
Thank you. The second question is: The strategic plan mentions reaching ILS 1 billion additional revenues from U.S. expansion. Can you provide any color as to how that might come about?
As I mentioned before, we still don't have exactly the specific company to acquire, but there is. We ran, with McKinsey, a big survey in the United States about the potential. We believe, and we now start to check which kind of platform we need to buy, because we talk about buying. We cannot do greenfield in the United States. We talk about buying a platform with route to market or with the right product or the right understanding the specific needs in order to build it. I believe knowing the market there and having some very interesting alternative, at the end of the day, we'll choose one of them. It will not be greenfield.
Thank you, Giora. The final question from Chris at Barclays is regarding the conflict in Ukraine. Do you have activities there?
Unfortunately, unfortunately, we don't have now activities in Ukraine. Just a very small activity. We pushed from the very beginning, and we asked our employees that live in Kyiv, we have there almost 135 people, to leave the business and to protect their life and their families, which is much more important than selling coffee. Most of them, they moved from Kyiv to, you know, small villages, small country, countryside places in order to protect themselves. Yes, during the last couple of days, we have some trucks that move from Poland to Ukraine, and we can distribute, but it is very small. First, we need to take care about our people.
Thank you, Giora. As there are no further questions, this will conclude our Annual 2021 Results Conference Call. Feel free to continue the dialogue online, and we look forward to seeing you next quarter. Thank you for joining us today.